Are governors serious about refusing stimulus? We'll see

White House Budget Director Peter Orszag says state legislatures can't apply for funds from a key pot of education money from President Barack Obama's $787 billion economic stimulus plan if the state's governor fails to do so. That means governors such as South Carolina's Mark Sanford who reject the money really will be costing their states school funds.

WASHINGTON — A state legislature can't apply for funds from a key pot of education money in President Barack Obama's $787 billion economic stimulus plan if the state's governor fails to do so, the White House budget director said in a letter released Wednesday.

With governors facing a deadline of this Friday to seek their states' shares of $48.6 billion in the recovery package's State Fiscal Stabilization Fund, White House budget director Peter Orszag's opinion puts more pressure on a handful of Republican governors who oppose the stimulus plan, which Obama signed into law on Feb. 17.

"We're glad the White House concurred with the state attorney general in validating what the governor has long believed — that he should be the one directing this money," said Joel Sawyer, Sanford's spokesman.

South Carolina has become a central battleground in the struggle over State Fiscal Stabilization Fund money, which makes up about a tenth of all federal spending in the stimulus package.

Sen. Lindsey Graham, a South Carolina Republican, and the White House Wednesday each released Orszag's response to Graham's request for an Obama administration ruling on the issue.

"For a state to access its allocation of the State Fiscal Stabilization Fund, the governor must submit an application to the secretary of education, and there currently is no provision in the Recovery Act for the state legislature to make such an application in lieu of the governor for a state's allocation," Orszag wrote to Graham.

Sanford's rejection of $700 million in stimulus money intended for schools in his state has raised his profile among conservative activists and fed speculation that he's weighing a 2012 presidential run.

At the same time, however, Sanford's stance has angered some fellow Republicans in South Carolina, where the 11 percent unemployment rate is the nation's second highest after Michigan.

Graham, who along with all but three other Republican senators voted against the economic recovery bill, urged Sanford to request the stimulus money, saying that South Carolina taxpayers would foot the bill even if the money goes to other states.

"We can refuse to accept it, but we cannot refuse to pay it back," Graham said. "Based on that dilemma, I believe it is in South Carolina's best interests to apply for these funds. They will do some good."

Republican Govs. Sarah Palin of Alaska, Rick Perry of Texas and Haley Barbour of Mississippi also have said they'd reject some of the stimulus money. Sanford, though, is the only governor to date who's said he'd refuse the education funds.

At a Maryland elementary school Wednesday, Education Secretary Arne Duncan said that states could begin applying for the stimulus money, most of which must be used to prevent teacher layoffs, hire new instructors, repair schools or build new ones.

Duncan released $44 billion in separate education money from the stimulus plan that Obama and Democratic lawmakers pushed to revive the flagging economy. States will get that money automatically under standard federal appropriations formulas.

The Republican-controlled South Carolina legislature has crafted legislation requesting the Fiscal Stabilization Fund money, but Orszag's letter suggests that the Obama administration wouldn't recognize or act on such a law were the legislature to pass it.

Working with the Republican leaders of the South Carolina General Assembly, Rep. Jim Clyburn, the third-ranking Democrat in the House of Representatives, had crafted a provision in the stimulus bill authorizing state legislatures to seek stimulus money that governors reject.

However, the Congressional Research Service, the nonpartisan research arm of Congress, concluded last month that it likely would be unconstitutional for a legislature to supplant a governor in accepting and using economic stimulus money.

In a nonbinding opinion Tuesday, South Carolina Attorney General Henry McMaster concluded that only the governor can certify the acceptance of $700 million in State Fiscal Stabilization Fund money, and that the legislature can't force him to spend it.

"It would be an unfortunate (and we believe unintended) policy outcome if the children of South Carolina were to be deprived of their share of federal stimulus dollars because the governor chooses not to apply for available funds," Orszag wrote.

Sanford, a fiscal hawk who served in Congress in the 1990s, challenged Obama over the stimulus plan in December, before he was sworn in as president.

Last month, he became the first governor to reject money from the Fiscal Stabilization Fund intended for his state, saying he opposes using deficit spending to jolt the economy.

Obama has twice rebuffed Sanford's written requests for a waiver authorizing him to use the stimulus money to pay down state debt.